UK consumer spending in 2017 likely to be lowest in five years
UK retailers face lower festive spending this year after a survey indicated consumer spending ebbed lower for the third month running in November.
Household spending fell 0.9% compared to November last year, a survey for Visa by IHS Markit showed on Monday, coming on the back of a 2.1% decline in October.
Visa said this made it more likely that the UK will see its first fall in overall Christmas spending by consumers since 2012.
Spending on the high street fell year-on-year for the seventh consecutive month, declining 3.5% overall after a 5.1% slump in October, two of the worst falls since 2012.
Online retail continues to take a growing share, though even the 2.4% increase in November was modest in the context of recent history.
Face-to-Face fell another 3.5%, with the 6% fall in spending for transport & communication the worst hit sector.
The only sectors to enjoy higher spending were hotels, restaurants & bars where spending grew 4.2% and the miscellaneous goods & services category, which includes jewellers, hairdressers and beauty salons, where spending climbed 4.9%.
“Festive cheer was in short supply for the UK’s retailers during last month as Black Friday promotions failed to lift consumer spending," said Visa's commercial chief Mark Antipof.
The survey indicated consumers are making changes to their shopping priorities as a result of the "increasing strain on household budgets", amid rising inflation, low wage growth and the sluggish economy.
"Cutbacks on big-ticket items such as car purchases and bookings for Christmas trips abroad led to the largest drop in spending on Transport & Communications in November," Antipof said. "In contrast, spending on miscellaneous goods which includes trips to hair and beauty salons and cosmetics and jewellery purchases saw the largest increase, offering further evidence of the ‘lipstick effect’, whereby people opt for smaller treats, at the same time tightening their belts when it comes to larger purchases.”
Economist Annabel Fiddes at IHS Markit said the data signalled 2017 was on track for its worst performance for five years.
"The High Street continued to struggle, and saw expenditure decline again in November, while online retailers saw only a modest upturn in spending volumes.
“Data broken down by sector meanwhile revealed a relatively broad-based reduction in expenditure, suggesting that households are cutting back on an array of goods and services."
Overall, she said the figures add to the relatively downbeat assessment for the UK consumer. "Unless the squeeze on households unwinds and consumer confidence strengthens, it seems unlikely that consumer spending trends will improve anytime soon.”